HFG's roadshow will take place in Singapore and Hong Kong over the next week, and end in London on October 9.
The bonds are rated Ba3 by MoodyÆs, while Standard and PoorÆs stated in a report released yesterday that it had assigned the issue a BB rating. ôThe long-term credit rating reflects HFGÆs fair underlying credit quality, which is affected by the execution risks associated with the companyÆs expansion plan, the competitive and fragmented market in which it operates, the companyÆs narrow business focus, and some asset-concentration risk,ö writes credit analyst Ryan Tsang.
This is offset, continues the report, by the companyÆs strong underlying liquidity and low inventory risk, a vertically-integrated business model, good brand image, and strong growth prospects in China.
Nonetheless, HFGÆs aggressive expansion plans pose some concerns. The company plans to increase its retail outlets from 135 to more than 300 by 2009 through debt and franchise arrangements, in order to meet the surge in purchasing power of Chinese consumers.
However, the company holds HK$700 million worth of gold assets (including world-famous gold washrooms in Hong Kong) which can be easily converted into cash if required, and enjoys a strong underlying liquidity position with HK$200 million in cash. This is against HK$526 million in debt maturing over the next 12 months, according to Standard and Poor's.
Should market conditions allow, the offering will follow hot on the heels of ICICIÆs $2 billion bond issue last week, which marked the first investment-grade Asian G3 transaction to come to market since July.
However, hopes for a stabilisation of the credit markets following the Federal Reserve's interest rate cut last month were shaken this week as Citi and UBS warned they suffered significant loan-related losses in the third quarter. They have become the latest and biggest banks to reveal huge ill-effects from the spike in mortgage defaults and freeze-up in the credit markets, according to Associated Press. Furthermore, Credit SuisseÆs investment banking and asset management results have also been affected, although the bank still expects to report a third-quarter profit of at least 1 billion Swiss francs ($860 million).
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